- Suppose we are in DFS (1997) world with free trade (Tij 1 for i, j...

   

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- Suppose we are in DFS (1997) world with free trade (Tij 1 for i, j = {H, F}), described in the lecture notes. If there was technology innovation in both countries such as ZH (W) ZF (W) = a. ZH (w) a. ZF (w) where a > 1, zi (w) represents tech level of country i in producing w at before the innovation, and z(w) represents the one after the innovation. 1. What would happen to the relative wage WH? WF 2. What would happen to the welfare of home country? 3. What would happen to the welfare of foreign country? 4. Repeat the above questions if the technology innovation only occured in H country such as ZH (W) = = a. ZH (w) ZF (W) - Suppose we are in DFS (1997) world with free trade (Tij 1 for i, j = {H, F}), described in the lecture notes. If there was technology innovation in both countries such as ZH (W) ZF (W) = a. ZH (w) a. ZF (w) where a > 1, zi (w) represents tech level of country i in producing w at before the innovation, and z(w) represents the one after the innovation. 1. What would happen to the relative wage WH? WF 2. What would happen to the welfare of home country? 3. What would happen to the welfare of foreign country? 4. Repeat the above questions if the technology innovation only occured in H country such as ZH (W) = = a. ZH (w) ZF (W)

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1 relative wage would remain the same because both countries face the innovation 2 ... View the full answer